Peak Payrolls? JPMorgan Model Points To Just 53K New Jobs In August

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by Tyler Durden
Friday, Aug 06, 2021 - 01:45 PM

With 10Y yields surging to 1.30% after touching 1.15% earlier this week, the market seems convinced that the taper is imminent, and why not: as discussed earlier, with almost 1 million jobs added in July, the prevailing consensus among Wall Street analysts is that this is "enough for tapering to start." But maybe it's not time for the champagne just yet.

According to JPMorgan's latest update of its economic model tracker using alternative and high frequency data, the next monthly payroll is expected to tumble, with the bank's Difference model now expecting 322K jobs in August, while the Levels model - if correct - would lead to a shock on Wall Street in one month, as it now expects the BLS reporting a paltry 53K jobs one month from today.

It is unclear how much of this growth slowdown is due to the various restrictions imposed over the Delta variant breakout, but the silver lining is that at least other modeled metrics are showing continued gains, with JPMorgan's forecast of control retail sales seeing a 4.3% drop in July control retail sales followed however by a just as powerful rebound of 4.7% in August.

Then again, when aggregating debt and credit card spending, it also appears that spending comped spending has also peaked.

As for GDP growth, here JPM's forecasts are generally in line with both monthly output and quarterly GDP...

A look at high frequency data impacted by covid reveals that when it comes to dining and driving, the peak hit about 1-2 months ago.

Looking at inflation, JPM's forecast of core PCE inflation over the next 12 months was surprisingly low at just 2.43% while core CPI is expected to rise 3.34%.

Finally, when looking at JPM's forecast for recession odds, JPM is rather adamant here: 0% (even if this rises to 21% if only merely extrapolates yield curve recession odds).